2015 Index of Economic Freedom

Solomon Islands

overall score47.0
world rank159
Rule of Law

Property Rights30.0

Freedom From Corruption25.0

Limited Government

Government Spending25.7

Fiscal Freedom61.1

Regulatory Efficiency

Business Freedom67.7

Labor Freedom68.6

Monetary Freedom74.3

Open Markets

Trade Freedom73.0

Investment Freedom15.0

Financial Freedom30.0

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Quick Facts
  • Population:
    • 0.6 million
  • GDP (PPP):
    • $1.9 billion
    • 2.9% growth
    • 4.2% 5-year compound annual growth
    • $3,455 per capita
  • Unemployment:
    • 3.9%
  • Inflation (CPI):
    • 6.1%
  • FDI Inflow:
    • $105.3 million
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The Solomon Islands’ economic freedom score is 47.0, making its economy the 159th freest in the 2015 Index. Its score is up by 0.8 point from last year, reflecting gains in the management of government spending, labor freedom, and business freedom that outweigh losses in monetary freedom and fiscal freedom. The Solomon Islands is ranked 36th out of 42 countries in the Asia–Pacific region. Although it has registered its highest economic freedom score ever in the 2015 Index, its overall score continues to be far below the world average.

Failure to fully embrace the principles of economic freedom has exacerbated poverty and undermined sustained development on the Solomon Islands. However, over the past five years, economic freedom in the island economy has advanced by 1.1 points. Efforts to open the economy to trade and investment have more than offset declines in the fiscal environment and freedom from corruption.

Nevertheless, the trade and investment environment remains weak. Trade restrictions are present on exports and imports, and the government screens foreign investment. The independence of the judicial system is threatened by corruption and political meddling. The government controls more than half of the domestic economy.

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Background

The Solomon Islands is a parliamentary democracy and one of Asia’s poorest nations. Danny Philip’s election as prime minister in 2010 stabilized a chaotic political environment, but allegations of corruption forced Philip to resign in 2011 rather than face a motion of no confidence. Gordon Darcy Lilo won the next election, held shortly thereafter. In recent years, Australia has had to intervene several times to defuse ethnic conflict, which holds back economic development. Australia, the European Union, Japan, New Zealand, and Taiwan provide significant financial aid. Most of the population lives in rural communities, and three-fourths of the workforce is engaged in subsistence farming and fishing. Growth depends largely on logging and timber exports.

Rule of LawView Methodology

Property Rights 30.0 Create a Graph using this measurement

Freedom From Corruption 25.0 Create a Graph using this measurement

Corruption is pervasive, and public offices are seen as opportunities for personal enrichment. Many current and former lawmakers have faced corruption charges. Threats against judges and prosecutors have weakened the judicial system’s independence and rigor. Judges and prosecutors have been implicated in scandals relating to corruption and abuse of power. Land ownership is reserved for Solomon Islanders.

Limited GovernmentView Methodology

The Solomon Islands’ top individual income tax rate is 40 percent, and its top corporate tax rate is 30 percent. Other taxes include a property tax and a sales tax. The overall tax burden amounts to 37.3 percent of the domestic economy. Government spending equals 49.8 percent of domestic output, and public debt is equivalent to 15 percent of gross domestic product.

Regulatory EfficiencyView Methodology

Implementation of a simplified registration process has improved the business environment but only marginally. The regulatory process continues to be undermined by uneven enforcement of existing laws. The labor market is underdeveloped, and informal labor activity remains substantial. About one-third of total public spending subsidizes infrastructure development projects, many of them funded by international donors.

Open MarketsView Methodology

The Solomon Islands’ average tariff rate is 8.5 percent. Some natural resources are subject to export taxes. Foreign investment is screened, and investment in many sectors is restricted. A small number of banks dominate the underdeveloped financial sector. The level of financial intermediation remains low, and access to credit for small and medium-sized companies remains very limited.

Country's Score Over Time

Bar Graph of Solomon Islands Economic Freedom Scores Over a Time Period

Country Comparisons

Bar Graphs comparing Solomon Islands to other economic country groups Download Charts

Regional Ranking

rank country overall change
1Hong Kong89.6-0.5
2Singapore89.40.0
3New Zealand82.10.9
4Australia81.4-0.6
5Taiwan75.11.2
6Japan73.30.9
7South Korea71.50.3
8Malaysia 70.81.2
9Macau70.3-1.0
10Brunei Darussalam68.9-0.1
11Kazakhstan63.3-0.4
12Thailand 62.4-0.9
13Philippines62.22.1
14Samoa61.90.8
15Kyrgyz Republic 61.30.2
16Vanuatu61.11.6
17Azerbaijan61-0.3
18Tonga59.31.1
19Mongolia59.20.3
20Fiji590.3
21Sri Lanka58.6-1.4
22Indonesia58.1-0.4
23Cambodia57.50.1
24Bhutan57.40.7
25Pakistan 55.60.4
26India54.6-1.1
27Bangladesh 53.9-0.2
28Maldives53.42.4
29Papua New Guinea53.1-0.8
30China52.70.2
31Tajikistan52.70.7
32Vietnam51.70.9
33Laos51.40.2
34Nepal51.31.2
35Micronesia49.6-0.2
36Solomon Islands470.8
37Uzbekistan470.5
38Burma46.90.4
39Kiribati46.40.1
40Timor-Leste45.52.3
41Turkmenistan41.4-0.8
42North Korea1.30.3
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